How could you earn a LIVING in tax liens and deeds, with $230,000 cash to start??

Question

I'm a former "investor/flipper" from a market where REAL deals have dried up, and need to make a "LIVING".

I know the difference between a tax lien and deed, and all the blah blah blah that the gurus will spend 3 hours telling you trying to rope you in to spending money with them. I know how to do the due diligence of title search, check local RE values, etc, etc, etc.

What I don't understand is, I read here and there in blogs and public internet conversations that the market for tax liens and deeds is dead, due to big institutions buying it all up, OR this crazy crap about cutting the rate you are willing to accept on liens.

Is this true?

I saw a You-Tube demo of bidding on a lien sale in Florida, and instead of it being the rate that is set, seems like you basically have to accept little to no profit in order to get the certificate. If that is the case then why bother?

It's also my understanding all these states with deed sales has redeemption periods that sounds like you'd better not spend one dime on the property and gotta sit-on-it for 1-3 years. That's ignorant! The only good that I can see is if these people pay off quickly and you can find enough sales around the country to keep your money turning in volume.

So back to the question, how can you make a "LIVING" in tax liens and deeds?

Jay Hinrichs · Answer

@Ronnie C.

that's been true in many Tax cert states for years.  not knew news at all.

230k just aint going to cut it to make living at this you need much more cash or a lot of leverage..

I wrote out a scenario for you on your other thread... Its one I used to start at exactly were you were.. I had 250k got my first 1 million dollar line and within 4 years I had it up to 30 million 6 in cash and 24 million in lines of credit ... that I used to lend HM.. and it was great until the world came to an end in 08... but we are rebounding I am about half way back to that peak I was at and things are great once again.. also look at new construction I have been doing that for 4 years now.. and with your credit score and epxiernce you might do better there.  WE are killing it in a few markets currently ... returns are well over 100% cash on cash

Ned Carey · Answer

@Ronnie C. yes you can make a living on tax sales because I do it myself. However it is not easy. It is also certainly not without risk.

Many of the big funds and bidders do not know the risks they are taking. There is a about a three year cycle in Baltimore city of big companies coming in and buying a lot of liens in. It takes about three years for them to realize the losses they have.  It is only when they foreclose on the properties that do not redeem, that they see that they bid way to much and will recoup nothing of their investment. Those heavy losses at the end, negate any profit from interest in the early years.

So how do I make a living - by being smarter and looking for the opportunities others don't see.  I bid low on a lot of liens and try to catch the ones that fall through the cracks.

Some areas are just too competitive. I could not make a living doing this in some of the local counties.

Ned Carey · Answer

@Ryan Koehler

For your tax lien business, are you using your own cash or cash from investors for your bids?

I am using borrowed funds, plus some of my own money.

@Tom Yung

Tom, not really giving away much, I have said that many time before. But yes Hard work pays off. Much of our success is the hard  work we put in looking at properties. I can't believe it myself but we looked at 8000 properties this year.

Tom Yung · Answer

@Ned Carey

Now you are giving away your secret. Your lawyer friend may not be happy with you again. Consistency & hard work always pays off.

Ned Carey · Answer

We foreclose on about 15% of the lien we buy. That is extremely high, but it is because of they type of low end and vacant properties we invest in.

Red Brown · Answer

@Ned Carey knows what he is talking about!

Been to sales where 95% of the bidders didn't seem have a clue what the hell is going on.

I watched a big bidder at a sale last year who could have stayed home and grilled himself a steak over that wad of cash and had a better return.

Chad U. · Answer

You may want to reach out to @Ned Carey, this is his niche.

Account Closed · Answer

I don't buy tax liens directly but am invested in a fund that does so. My understanding is the reason you buy a lien for almost zero percent return is that it gives you the right to pay next years taxes and get the statutory amount on that. So say year one you invest $1000 and get only 2%. But year 2 you invest another $1000 and get 18% on that. So on average you have a 10% return on the 2000 (or more if they are paid off earlier). Tax liens seem incredibly complex with rules and regulations and bidding etc and I can't see how an individual investor could really participate in any meaningful way (like trying to deploy $250K). There are however funds that allow you to passively participate in the asset class for decent returns.

Joel Owens · Answer

Jay if you do not like the tax strategy then how did you build your lines of credit so large to take advantage of other niches??

What process did you use??

Ryan Koehler · Answer

Ned,

For your tax lien business, are you using your own cash or cash from investors for your bids? Thank you in advance. I've been a long time lurker of the tax lien forums on BP and have always appreciated your thorough replies to everyone.

How could you earn a LIVING in tax liens and deeds, with $230,000 cash to start??

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